OLYMPIA, Jan. 17.—Deep-seated suspicions among many legislators that Gov. Jay Inslee may try to impose low-carbon fuel-standards on the state – a move that could dramatically increase the price of gasoline – brought a blistering response from the state’s chief executive Thursday.

But it didn’t bring the one thing some lawmakers have been demanding as they ponder an increase in the state gas tax for road construction. A promise from Inslee that he won’t do it.

In his letter to leaders of the Senate Majority Coalition Caucus, the governor says suspicions that he has been hiding his intentions are “offensive and untrue.” That’s because he has made no decisions and therefore has no intentions. He also says suggestions that the rule might raise the cost of gasoline a dollar a gallon are “hypothetical” – though skeptical lawmakers observe that the figure is based on a consultant’s report to a climate-change task force Inslee convened last year.

Yet even as the governor appears to challenge the legitimacy of the concerns, he also says low-carbon fuel standards are a promising idea. He says that if he were to impose them, he would do in a way that would not send fuel prices skyrocketing. Lawmakers who are raising the issue may just be looking for an excuse for “inaction,” he says.

The governor’s statement, which appears in full below, does nothing to allay suspicions that have descended on the Capitol in recent weeks, says House Minority Floor Leader J.T. Wilcox, R-Yelm. The fear that Inslee might impose the rule on the state without a vote of the Legislature has put an enormous kink in this year’s debate on the transportation package. Wilcox says it is a question that needs to be resolved. “To me, there is an easy solution here,” he says. “The governor can say he won’t do it.”

If the governor won’t do that, Wilcox says, he only heightens the doubt.

Buck a Gallon?

Basis for buck-a-gallon speculation came from the state itself, from a Sept. 27 consultant’s report to Climate Legislative and Executive Workgroup. Per-ton estimates were based on the California program, if transplanted to Washington state. Translate those numbers into per-gallon figures using a standard calculation and you get a compliance cost of 93 cents to $1.17 a gallon, says the Western States Petroleum Association.

Low-carbon fuel standards, a popular idea in green-policy circles, require refiners to blend gasoline and diesel fuel with an advanced form of low-carbon ethanol in order to reduce the carbon content of tailpipe emissions. But big problems have emerged with the policy in California, the one state that has imposed the rule so far. Regulators were counting on the creation of a “cellulosic ethanol” industry, based on tree bark and agricultural waste. But that has yet to emerge, and when stringent new requirements are phased in next year, oil refiners warn of big spikes in prices, supply disruptions and plant closures.

What is worrying fuel-dependent groups in this state is that Inslee seems to be signaling enthusiasm for imposing the same rule here. Inslee has made climate-change legislation a major push for his administration, and low-carbon fuel standards were a major topic of discussion when a climate-change task force convened by the governor met last year. In October, Inslee signed an agreement with the California, Oregon and British Columbia in which he pledged that this state would enact low-carbon fuel standards, though he didn’t say exactly how. And the Department of Ecology maintains it already has authority to impose low-carbon fuel standards by regulation, under the state Clean Air Act – though it would take an executive order from Inslee before the agency would embark on such a dramatic policy change.

The idea that low-carbon fuel standards would dramatically increase fuel prices is far from hypothetical. A study from the Boston Consulting Group commissioned by the Western States Petroleum Association estimates increased compliance costs in the Golden State at 33 cents to $1.06 a gallon. At this point, the California policy offers the only model for other states to consider; indeed consultants last year for this state’s Climate Legislative and Executive Workgroup tried to assess what would happen if the policy was imposed here. They concluded the cost would be $103 to $131 per ton of carbon-dioxide reduction.

So if Washington lawmakers rely on the state’s own figures, standard math calculations based on the carbon content of fuel can be performed that establish the compliance cost at 93 cents to $1.17 a gallon, says Frank Holmes of the Western States Petroleum Association. Perhaps the exact figures aren’t as important as the fact that any low-carbon fuel standard would increase the cost of motor fuel, he says. “The reality, based on the Boston Consulting Group report, is that the low-carbon fuel standard in California isn’t feasible, and that there are going to be costs associated with it,” he says.

The idea that Washington might impose low-carbon fuel standards is proving a big problem for lawmakers who hope to pass a transportation package this year. It’s hard to sell people on an 11.5-cent gas-tax increase as long as a much higher increase might be around the corner, lawmakers warned last week at an Associated Press legislative forum. House Transportation Chair Judy Clibborn said some user groups, among the Washington Trucking Associations, have threatened to withdraw support if low-carbon fuel standards remain a possibility. “I think it is very difficult for us to go forward if that is not clarified, whether that is going to be done by executive order,” she said.

“I don’t know if anybody up here has been notified by the governor about the carbon fuel tax,” said Senate Transportation co-chair Tracey Eide. “And yes, that will hurt the revenue package.”

Though it should be noted Democrats have not demanded that the governor clarify his intentions, Republicans have no such qualms. Earlier this week, Senate Transportation Chair Curtis King, R-Yakima, urged Inslee to use his State of the State Address to “come clean,” a suggestion Inslee ignored. And Wilcox, with state Rep. Shelley Short, R-Addy, announced plans for a bill that would forbid the Department of Ecology from imposing the rule without a vote of the Legislature. “I will tell you, we are getting more interest on the carbon issue than on almost anything we are talking about,” Wilcox says. “This is a big thing. I personally wish he would present it as a bill, so people could take a stand on it – and who knows who would support it? It might actually be a good public debate.”

Says Concern is ‘Fear Mongering’

In his letter, Inslee says he believes low-carbon fuel standards could make sense, and he says that if he were to advocate them, he would want to improve on the California policy. “Nowhere does there exist a proposal from my administration for how such a standard would be designed,” he says.

Later he says, “I can assure you that no proposal for me that adds significant costs at the pump will ever materialize.” Any such proposal would involve a public discussion of costs. he says. And he suggests Republican lawmakers are raising the issue so that they can duck a tough tax vote. He notes that King improperly referred to the standards as a tax in public statements, though he does not mention Democrat Eide’s use of the term.

Inslee’s letter takes on King directly: “You have publicly called on me to ‘come clean’ about my plans for a ‘carbon fuel tax.’ I have discussed a low carbon fuel standard as a mechanism to develop cleaner fuels for our state. There is no element of the clean fuel standard that could in any way be called a ‘tax.’ That you choose to call it a tax suggests that this effort is more than about fear mongering or excuses for inaction than an actual discussion of the cost of reducing pollution from our transportation system. That you have cited hypothetical costs in excess of one dollar per gallon reinforces my impression that this is about politics and not substance.”

King did not respond to a request for comment from Washington State Wire Thursday, and staff explained that he is working on a response of his own.

I believe that a transportation investment package is unfinished business for our state, and we simply need to get it done this session.

I’m encouraged by the tremendous leadership that is already advanced this issue. I’m encouraged by the legislators who participated in negotiations late last year. I’m encouraged by the broader coalition of business, labor environmental groups and local governments who are continuing to advance the conversation as a unified voice of support. And I’m encouraged by everyday citizens – the thousands who took time out of their data make their voice heard in numerous transportation forms, hearings and surveys across the state last year, including the Senate summer listening tour.

Is clear that both the need and demand for new investment in our transportation infrastructure are at an all-time high. We know why we need to get a package across the finish line as soon as possible. Fundamentally this is about safety, jobs, traffic relief and accountability.

As you know, I pushed hard to get a bipartisan compromise during recent transportation negotiations. Although substantial progress was made, it became clear to everyone involved that this phase of the process had run its course and the next step was to continue the dialogue in the legislative process.

The good news is the house has already passed a package and the MCC has draft bills and held a work session for a proposal it released in November. I see no reason why we can’t pick up from where we left off. I asked that the Senate negotiate a package among both caucuses that can garner a majority of votes in your chamber. When you develop such a proposal, I commit to working with you to find the needed votes on a package acceptable to both chambers. I would not expect you to pass a package on the Senate floor before having assurances the package could win sufficient House votes. I believe this path offers our best chance of success, and I stand ready to work with you.

Sen. King, you have publicly called on me to “come clean” about my plans for a “carbon fuel tax.” I have discussed a low carbon fuel standard as a mechanism to develop cleaner fuels for our state. There is no element of the clean fuel standard that could in any way be called a “tax.” That you choose to call it a tax suggests that this effort is more than about fear mongering or excuses for inaction than an actual discussion of the cost of reducing pollution from our transportation system. That you have cited hypothetical costs in excess of one dollar per gallon reinforces my impression that this is about politics and not substance.

Here are the facts: the clean fuels standard (or “low carbon fuel standard”) would require the fuel industry to reduce the overall carbon pollution in transportation fuels, gradually over time, through a variety of possible means including blending biofuels and gasoline or diesel, supplying cleaner gasoline or diesel, more use of natural gas for electricity to power motor vehicles, and other options. The standard would include cost containment measures to ensure that fuel prices are not significantly affected.

In the Climate Legislative and Executive Workgroup, we have discussed a suite of measures that could meet our carbon pollution reduction goals. I believe that, if constructed well, a clean fuels standard could be one such measure. I’ve stated this belief many times, and a well-designed, economically sound clean fuel standard should remain under consideration. But nowhere does there exist a proposal from my administration for how such a standard would be designed. Be assured that any such proposal from me would include strong cost containment measures, and would learn from and improve upon the experience of other states. Therefore, without the existence of such a proposal, I don’t understand your contention that “my proposal” will cost anything, let alone in excess of a dollar per gallon. What’s more studies show that a properly constructed, clean fuel standard could actually save money at the pump.

If anyone tells you my proposal will cost money, or save money, they are not telling you the truth. No such assumptions can be made regarding a proposal that doesn’t exist, and I can assure you that no proposal for me that adds significant costs at the pump will ever materialize. I will ensure this by demanding real cost-containment measures in a thorough and very public analysis of all costs and benefits associated with any clean fuels proposal before moving forward.

That you say I have to “come clean” implies I have in some way been hiding my intentions. This is offensive and untrue. Anyone that knows me knows that I am interested in effective ways to combat carbon pollution, including cleaning up our fuels. If in the future you have questions about my intentions, I suggest you ask me.

Finally I have to express disappointment that in the months we have spent together in transportation negotiations, never once did any of you bring this up to me as a concern. To do so now, with such disregard for the facts and at such a critical moment in transportation discussions, causes me great concern.

You have each spent considerable time and energy on transportation these past several months. Let us rededicate our joint efforts and focus on the real goal of providing our state with the transportation infrastructure it so desperately needs. Our goal in this process cannot be to get all of what we each might want, but instead to get what the state needs. If we follow this principle, I know we can succeed.